Scandal Shines Spotlight on India’s Procurement Problems

Feb. 26, 2013 - 09:25AM
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NEW DELHI — While moves by the Indian Ministry of Defence to cancel a helicopter contract with AgustaWestland over alleged kickbacks have drawn headlines, some military officials and analysts say a complex, lumbering procurement process creates conditions where such actions are more likely and represents the larger problem for India’s military.

“The procurement process takes place at various levels and by various agencies, and there are chances that suppliers use dubious means to push through their product,” a senior MoD official said. “The media is unduly blowing up the issue, which could hamper the purchase of much-needed weapons and equipment.”

Bureaucratic delays in procurement and the over-cautious approach taken by the MoD, especially in the past five to six years, have slowed weapons acquisition, with several tenders canceled and overseas companies blacklisted. Some service officers said in private that the procurement system is at fault and there is no need to cancel previous contracts.

The Army has yet to buy a single howitzer gun since 1987 because tenders had to be rebid midway through the competition after first Denel of South Africa in 2005 and then Singapore Technologies in 2008 were blacklisted.

The big-ticket bids floated in 2008 for purchase of 155mm/.52 caliber tracked and wheeled guns have yet to be concluded.

The Army’s urgent requirement to buy light utility helicopters is still under procurement after a second global bid was floated in 2009. The earlier process had to be halted because Bell Helicopter claimed it lacked transparency.

The Air Force has failed to complete a procurement since 2007 for the $11 billion Medium Multirole Combat Aircraft program, for which the French Rafale is the preferred aircraft. An Air Force officer said, “They are keeping their fingers crossed and hope the deal will be concluded this year.”

The MoD is being overly cautious to ensure transparency, a ministry official said, but analysts point out that delays also can cause cost overruns, which cannot be overlooked.

Besides being slow and bureaucratic, the procurement process has no accountability, critics say.

“The system is such that accountability is grossly lacking,” said K.V. Kuber, CEO of Sugosha Consultancy Services. “This means that anyone in the government can hold on to a file for as much time as he likes, hiding in the excuse of deliberation. This is what I call bureaucratic lethargy. This lethargy induces fear in potential contractors that something is amiss. They then resort to all sorts of games.

“A better way is to have clear accountability and fix the lethargic movers in the system, as they breed corruption, either knowingly or unknowingly,” Kuber said.

Laxman Kumar Behera, research fellow at the Institute for Defence Studies and Analyses, a think tank here, agreed.

“I think India’s defense acquisition system involves a degree of ad-hocism and lacks single-point accountability,” Behera said. “Officials across the acquisition chain are not properly staffed and trained to undertake the job assigned to them. Similarly, multiple agencies from within the armed forces, Defence Ministry, Defence Research and Development Organisation and other establishments are involved in the procurement process, but there is no centralized accountability. What is needed is a centralized and professional procurement agency with the overall responsibility to ensure procurement in a time-bound manner.”

Procurement on a government-to-government basis has been the fastest, as India signed deals worth more than $8 billion with the U.S. in the past six years to buy P-8I long-range maritime reconnaissance aircraft, C-17 Globemaster aircraft and C-130J heavy-lift aircraft.

India also inked a deal with Russia to jointly manufacture a fifth-generation fighter aircraft, for which the Indian Air Force is likely to spend more than $25 billion.

“Open competition is a very tedious process compared to buying on a government-to-government basis,” an MoD official said.

The Defence Ministry has sent a show-cause notice to AgustaWestland asking why its helicopter deal should not be canceled. As a final decision is awaited, analysts question the haste in canceling signed defense deals.

“Cancellation of a defense contract is the resort to the path of least resistance,” Kuber said. “This does not mean you are honest, it does not mean you are efficient, it does not mean you have taken action. Because the only action you have taken is against the armed forces, to deprive them of the systems they so very urgently need, often for no fault of theirs.

“If the government wants to be efficient, then they must institute measures for cleaning the system, come [down] heavily on erring officials and create accountability in the system.”